Et Cetera

Fire your investment advisor or financial planner now

I have already made up my mind way before I started reading The Random Walk Guide To Investing by Burton Malkiel. Yes, I (kinda) fired my Financial Advisor/Planner. Why? Because I found out the Whole-Life insurance policy that I bought in 2005 naïvely based on his recommendation actually allowed him to make at least ten times more in sales commission than if I bought a simple Term-Life insurance. His sales commission for Whole-Life insurance was nearly 100% of my annual premium. For Term-Life, his commission was no more than 20%. You see... no wonder he never offered me Term-Life.

To learn more about the fundamental differences between the two said policies: Whole-Life vs. Term-Life

For those of you who are not sure how to plan for your investment: just read the book I mentioned above. Your perspective of personal investment will be changed forever. Investing is not that complicated - it’s just often clouded by an air of complexity that makes it seem difficult for you and I to understand. No kidding!

For those of you who have adopted a Financial Planner's (a.k.a. Insurance Salesman) recommendation to buy Whole-Life policy: just get the surrender amount, bite the bullet, buy the simplest Term-Life insurance and invest your own money according to what Malkiel suggested.

PS: When you invest for retirement just remember this: "time is important, timing isn't."

You need to see your situation at that time before judging your financial planner/adviser. You might have had enough income to buy a whole-life ins but not enough capital to grow, thus you're expected to cover your life as well as to invest regularly. If you have already had enough capital to grow, say $200,000 in a lump-sum investment of growth portfolio model, your fin planner/adviser may advise you to buy a term-life ins to cover your life as you earn and to invest separately in a recommended growth portfolio.

A fin planner is not an insurance salesman, the function is much more comprehensive including financial planning, investment advice and insurance advice. There are normally professional conducts and code of ethics. Fee disclosure is one of them.

Some years back I 'retired' from a large corporation with considerable money in my 401k. I had been lucky - had put my money into company stock for 25+ years and had done really well. When I left the company, I moved my 401k dollars out of stock and into a money market. Soon after that, the stock took a nosedive (nothing to do with my leaving, I'm sure!!). It scared the heck out of me and I realized what a risk I had been taking.

I also realized that I needed someone to take care of my money. I had no experience, investing is difficult (so I thought - really, I's very simple) and I needed a professional. I wanted my money to last so I would never HAVE to work again and could travel the world...and I was in my 40's.

I started meeting with financial advisors and I also started learning a bit about investing so I wouldn't be completely igorant. What I learned made me very concerned about the things the financial advisors were telling me. They all talked big - about beating the market, buying these great VULs and VAs, funds that had great returns - but all these things were what I had read you should not do. But I wasn't sure, nothing made sense and I kept reading and interviewing.

Things got much worse. I knew I needed to reinvest my money, none of the fiancial advisors were saying the things I thought I should hear, I wasn't really integrating what I was learning and when I learned about fees and tried to find out what fees I would be paying (almost impossible to find out) the fees seemed really high. I was totally freaked out. I couldn't sleep, I had interviewed about 15 'advisors' of all shapes and sizes and I just wanted someone to make the whole mess go away. I was paralyzed.

Slowly, something wonderful started to happen. I started to 'get' investing. I had been making it far too complicated. I read a couple great books and a few great articles and it all clicked - I CAN DO THIS!!!!

And I did. I rolled my 401k over into an IRA at Vanguard (I researched several firms and liked Vanguard best), I set myself up with a well-diversified, low-cost portfolio of mostly index funds and life was great. I weathered the bear market very well, am stress-free, have gotten very nice returns, have gained a lot of self-confidence, my fees are less than .2% and I never have to worry that I have no idea what is happening to my money. I know the person investing it really does have my best interest at heart! Me!!

Part 2 - I kept researching the investing industry and started wondering how other people using brokers (calling themselves financial advisors) were doing. I asked a couple of my good friends from where I had worked and they spoke glowingly about their 'advisors' but could not tell me about fees or returns or really anything about what was happening to their money. But they sure liked their financial advisors!

So, I looked at the costs of their funds and showed them what they were paying. I showed them their returns. Several were invested with Ameriprise and that was the worst! No index funds, high loads, poor performance, 12b-1 fees, revenue sharing. Not good. They were shocked at what I told them. They asked how I did my own invesing and I gave them resources. I talked them through the rough spots. They went through pretty much what I did, but I was there to show them the evidence...the reality. I hated it when they had to confront their advisors, who became really nasty. I loved seeing them take charge of their own financial future....and loving it like I did.

They told other people about me and pretty soon, I was helping quite a few people learn about their investments. I was doing what their 'financial advisor' should have done, but didn't.

I do not charge anyone and I do not tell people which funds to invest in or set up an asset allocation for them. They do that themselves. I give them tools and truth. I have no agenda except telling people the truth. If they want to stay with their advisor, I'm fine with that, as long as they know what they are paying and what is really happening to their investments. None ever know before I tell them and, so far, none have stayed.

This is why I am so frustrated to see financialjoe present such misleading ratings, and how I know that the ratings ARE misleading.

Over the years, I have spent a LOT of time in discussions with financial advisors. They hate me. I have been called every filthy name in the book. They hate that I know what they are up to. Even the ones with good intentions seem to know that they are not providing true value. How could they when a client is paying 2 or 3% in overall investing costs for returns that are far below what I get with a simple, low-cost portfolio of index funds? (refer to the BCT study for details)

There are exceptions. I have met some fee-ONLY advisors that love what I am doing and have helped me. They charge a one time, flat fee, or by the hour and put people into very low-cost portfolios with index funds, like mine. But fee-only isn't a guarantee of ability.

I was really hopeful when I found the financialjoe website, but I now know that he's one more 'financial advisor' that does not want to expose what is really happening. If he did, he would have known about the BCT study and would be very interested in exposing what fees mean over time and how actively managed funds usually underperform index funds. But he gives the same kinds of responses I have gotten from all the other brokers, sans the filthy names!
Perhaps he's after advertising and maybe looking to sell the site down the road, and that's why 'participation' means so much to him.

Anyways, that's how it is and I am very proud of what I do and I love helping people. Sorry to go on for so long!!

Suzanne - you seem to have this same doc that you paste in every website you go to. Who are you really? I have been conducting a lot of research and seem to find this post splattered all over the place. So nice story...and even better marking who ever you are today...the name seems to change....so how can you be trusted!

Financial Planners/Advisors are not all bad, as some of you seem to think. I'm glad Suzanne points out, at the end of her post, that she has met and likes several Fee-Only planners. While I agree that fee-only doesn't guarantee ability, it does guarantee that you are getting unbiased advice. Fee-Only planners/advisors usually have Fiduciary responsibility (if you don't know what that means look it up), and will not accept any commissions. They get no benefit from you investing in one stock vs another, or one type of insurance vs another.

I'm going to keep this short, because everyone here already has their opinions and I frankly am not going to try to change all of them. My take on this, and my advice, is that you DO use a financial planner - even if you dont have them manage your money speak to one and have them work with you to come up with a plan. They will explain the reasons behind their suggestions and are actually VERY helpful to the average person who works full time and didn't get to retire at 40 leaving them with days, weeks, or even months to learn about investing.

Suzannes advice in terms of investing isn't bad, but I would argue that many people would benefit from speaking with an advisor. I would only recommend speaking with a fee-only advisor though, and suggest you do some research on them before picking the one that is "right for you." The SEC provides some useful questionnaires you can download on their website with good questions to ask an advisor to help you select the best one for you.

I have been trading for approximately 25 years and history will repeat itself over and over and over again. If you are an entreprenuer… know your risk limits. Create a plan and stick to it — There is money to be made in both a bear and a bull market, so decide where the market is and take wins and losses like a true entreprenuer. Taxes are a part of life… put that in your business model.